Under the measure, the RBI will provide a concessional forex swap facility until September 30, 2026 to incentivise 3-5 year External Commercial Borrowings (ECBs) by Central Public Sector Enterprises (CPSEs).
The announcement comes at a time when global financial markets are witnessing increased volatility due to risk-off sentiment and rising demand for safe-haven assets.
RBI Governor Sanjay Malhotra noted that major central banks have become more cautious and may tilt towards tighter monetary policy, contributing to fluctuations in foreign exchange markets.
The concessional swap facility is expected to lower hedging costs for state-run firms raising funds overseas, making foreign borrowing more attractive while also helping attract dollar inflows into the country.
The move forms part of a broader package unveiled by the RBI to strengthen external buffers and ease pressure on the rupee. The package also includes measures to attract foreign investment into government bonds and foreign currency deposits.
Manoranjan Sharma, Chief Economist at Infomerics Ratings, said the RBI’s latest initiatives are aimed at easing pressure on the rupee and narrowing part of the balance-of-payments gap.
He said incentives for PSU external borrowings, alongside other forex-related measures, reflect the central bank’s efforts to strengthen India’s external sector amid global uncertainty.
Basant Bafna, Head – Fixed Income at Mirae Asset Investment Managers (India), said the measures around foreign capital flows, external borrowing and forex management were among the most significant announcements of the policy. According to him, lower hedging costs and improved overseas borrowing conditions could encourage PSUs to access international markets, reducing pressure on domestic debt markets and supporting lower borrowing costs.
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